Oregon's new charity law takes tax break away

SALEM, Ore. (AP) — State officials and nonprofit leaders believe Oregon is the first state in the nation to pass a charity law that punishes nonprofits that spend too little of their money on their missions.

The law will eliminate state and local tax subsidies for charities that spend more than 70 percent of donations on management and fundraising over three years, the Statesman-Journal reported in Sunday's paper (http://is.gd/yJAIca ). The measure, House Bill 2060, was signed by the governor in June.

"No other state has done this," said Jim White, executive director of the Nonprofit Association of Oregon. "We're the first in the country, and we should be proud of that."

There are 17,152 charities registered to solicit funds in Oregon. About 23 percent of those are based out of state.

The Oregon Department of Justice already has identified the top 20 worst charities, which all spend less than 30 percent of their money on programs and services. The list is available on the agency's website: http://is.gd/CaktEo .

It includes a Michigan-based law enforcement charity that the department says spent less than 3 percent of its money on programs over the past three years. Also on the list is a California-based international ministries group that allegedly spent just over 3 percent on programs.

All 20 of the worst charities are based out of state. They spend between 2.7 and 21.7 percent of donations on programs, according to the Justice Department.

Some states, including Oregon, used to have laws prohibiting charities from soliciting donations if they were paying too much to themselves and their fundraisers.

The laws were repealed after the U.S. Supreme Court ruled in 1980 that attempts to restrict a charity's ability to solicit donations violated their First Amendment rights.

Oregon's new law likely would survive a challenge because it doesn't restrict a charity's ability to do fundraising, Department of Justice spokesman Jeff Manning said.

Instead, donors to those charities can no longer claim a state tax deduction. The charities also will lose their local property tax exemptions.

"These organizations have found the business model of using a nonprofit as a cover for what's basically a telemarketing for-profit firm," White said. "They're giving charities and nonprofits a black eye and need to be gotten out of our midst."

State officials estimate fewer than 100 charities will be affected by the law in its first year.